Retirement can seem like a long ways off as you make your way through your career–and, of course, life–during your 20s, 30s, and 40s. However, when you get into your 50s, suddenly it might not seem so far off in the distance. Your early 50s, in particular, are a really good time to get serious about retirement. What does it mean to “get serious” about retirement? It means sitting down and taking a long, hard look at where your finances stand and when exactly you want to retire. You will also want to reassess your retirement goals and get a good understanding of what life in retirement will be like. What will your retirement budget be? Do you plan on paying down your debt before retiring? Are you going to move for retirement? These are some important questions you will need to ask yourself as you near retirement age. The answers may surprise you and will give you a good sense of what is realistic regarding retirement. Now, I’m not saying you need to wait until your 50s to get serious about retirement (the earlier you start, the better), but I am encouraging you to not wait until your late 50s/early 60s to start thinking about your post-work life. Remember, retirement is serious business that requires a plan and hard work, both before and during. Taking the time to properly prepare for it so that you can enjoy it is very important. So, are you ready for retirement?
A majority of the time, personal finance conversations/blog posts/podcasts center around saving. When spending money gets talked about, usually it has to do with paying down debts or making necessary purchase, such as homes or cars. However, it’s important to remember that finance is more than just saving for retirement or to own a home. It’s more than just worrying about debts. Spending is an important part of personal finance as well. Now, I’m not encouraging you to go out and spend like it’s going out of style. What I am encouraging you to do is to be smart with your money and to spend on things that are important to you. Is there a hobby that keeps you active and happy? Don’t be afraid to spend a bit on it. Of course–I’ll reiterate–don’t spend obscene amounts on it, but a few dollars here and there won’t hurt. Being happy and active can go a long way in life and is just as important to your well being as how much money you save. Spending can also be helpful in other ways, such as helping you to build credit, if you are a young saver. Having strong credit can help you down the road when you apply for car loans or mortgages by helping you to secure a favorable rate. The key though is that you don’t get too caught up in saving as you march towards retirement. Yes, you should of course work to meet your retirement saving goals and should save enough live comfortably after you stop working. However, you shouldn’t be afraid to spend a little on yourself. Don’t be afraid to plan a vacation from time to time or buy yourself that new piece to tech to make your life a little more efficient. So what will you spend money on?
It may not be obvious, but we have a retirement problem in this country and the economic crisis created by the efforts to combat COVID have exposed it. Not enough people have enough saved for retirement. The economic conditions that began back in the early Spring have forced many older workers into forced retirements that they were not fully prepared for. For those younger workers who suddenly found themselves on unemployment, there aren’t enough jobs that offer strong retirement benefits or high enough wages to allow them to look beyond the survival necessities (i.e. rent, food, gas, etc.). Demographics and class also play a role in whether people have the opportunities to save for retirement. While there are a lot of tools available today for anyone to save for retirement, the tools are not the issue. The issue is that fewer people have wiggle room financially to save enough for retirement. Most people with hefty retirement accounts either had jobs that paid well or spent years working for big companies that offered strong benefits. For many in the gig economy or working for small businesses, the opportunities to save and the benefits of things like matching contributions or stock ownership plans are just not there. And yes, there are more working in the gig economy or small businesses than many of us realize. So what’s the solution? Well, there was recent legislation passed that makes it much easier for small businesses to band together and offer retirement benefits as well as pushes back the age for requirement minimum distributions (RMDs). However, we may need to have a larger discussion about how we go about saving for retirement after these current economic conditions improve, particularly about pay and the cost of living in this country. There may also need to be further reform of the tools that we have, making them easier to use and understand. We will see what the future brings regarding all this.
You’ve probably heard me say on this blog that the best way to save for retirement is to start early. The same goes for investing. One of the best ways to teach your kids about the stock market and get them thinking about their financial future is by allowing them to invest in the markets. Many of the major investment platforms offer custodial accounts, which allow parents to set up trading accounts for children under 18 and which require adult permission to complete transactions. Once you have the account, you can decide how to best teach your teenager the importance of risk and investing. If you have more than one teenager involved, maybe make a game out of it and see whose investments perform the best over a set amount of time. If your teenager is more goal oriented, maybe encourage them to use the account as a way to grow money for something like a car or product they want. Whatever you choose to do, be sure to guide them and set some limits. You may want to limit what investments they can put money into (no options, etc.). You will also want to encourage them to use properly vetted resources, such as popular investment books or well-sourced blogs. Heck, you yourself may want to use it as an opportunity to read back up on the latest investing trends and advice out there, if you haven’t already. Of course, you will also want to teach your children about risk as they will most likely experience some loss. It may be hard for them at first, but if you encourage them to be patient and learn from why the investment went down, then it will be a good thing in the long run. Just make sure they don’t lose too much, or for that matter, gain too much without learning about trends and why their investment performed the way it did. With the right guidance and some sound advice, your children can learn about the stock market and hopefully set themselves up for a solid financial future. What did you wish your parents taught you about investing growing up?
“Change is the only constant.” You’ve probably heard this expression before. I believe it is sometimes attributed to the Greek philosopher Heraclitus, but it gets used often as a business mantra or by people who are seemingly always in motion. It’s also a reminder that despite our best efforts at times, change happens. I’ll admit, change can be scary, but it can also be a wonderful thing. It can force us to reflect on where we are and where we want to go. It can also provide us with an opportunity to try new things and make decisions that we have been putting off. For example, changes in the markets can force you to re-evaluate your investments and portfolio (did you really think I wasn’t going to tie this back to investing or retirement planning some way? lol.). That can be a really good thing. Markets are prone to change as companies come and go and stocks trend up and down. As such, you will need to buy and sell investments from time to time, especially if you are investing for the long-term. Same goes for your retirement planning. Over time, your benchmarks and goals will change and you will need to act accordingly. Yes, it can be a bit scary to think about having to pivot your retirement saving plan, but it can also be exciting. It can be refreshing to have a new interest or goal that fits with what you want more than what you currently have. It really all depends on how you look at it. Change can be a wonderful thing, are you ready for it when it eventually comes?
I was recently reading an article that discussed the impact one’s health can have upon their retirement and retirement savings. This article wasn’t about the cost of healthcare in retirement and aging, but rather how living a healthy lifestyle can be really helpful when it comes to retirement and how it’s not impossible to do. When many people connect health and wealth in retirement, the conversation just about always centers around the cost of aging–things like medications, assisted living, visits with specialist doctors. Very few people talk about living a healthy lifestyle–both before retirement and once you reach retirement–and how that can make your nest egg go farther and your overall wealth increase. Yes, healthier people tend to be more successful professionally and tend to make more money. When you make more money you can build up a bigger nest egg! Doesn’t that sound nice? Realizing the way your health may impact your retirement savings can be huge from a planning standpoint as well. If you know that you may be susceptible to certain conditions or diseases (i.e. through genetics or lifestyle), then wouldn’t you want to plan for that? Of course you would. Now, if you aren’t living the healthiest lifestyle at the moment, don’t fear, it’s never too late to start. What matters is that you take the steps necessary to get healthy. How do you think your health might impact your wealth?
Is it possible to save too much for retirement? That may seem like an odd questions. However, the answer is…yes. The answer isn’t so much focused on finances, but rather how saving for the future is impacting your life in the present. Sure, we all want to have that seven-figure nest egg, but what if getting requires forsaking a lot within your current life? I’m not saying you shouldn’t budget and be smart with your money, but don’t get carried away with it. In other words, don’t be afraid to take a vacation from time to time. Or go out to dinner once a week. Or don’t be afraid to buy a reliable, new car to get you through to retirement. What you don’t want to do is enjoy living your current life with your sole focus being on retirement. On the flip side, you also don’t want to live too much in the present and not save enough for the future. However, that is for another blog post. Right now, I want to make sure that you find that nice balance where you are saving for retirement, but also able to enjoy life in the moment. So, yes, you can save too much for retirement, but it’s not so much because you have too much stashed away in your nest egg, but rather because you are not living enough in the present. Remember, saving for retirement isn’t easy, but it shouldn’t consume you or be too much of a burden on your current life. If you need some help with planning for retirement or advice on how best to save, you should speak with a certified financial planner or wealth manager.
I recently spoke with some family members in the Northeast who lost power during a big storm that rolled through. It took them four days to get power back. While they were able to get by just fine, it got me thinking about the importance of being prepared for emergencies. I know I’ve talked about such preparation in the past, but I feel like it’s something that should be brought up from time to time as it’s very important. As you plan for the future and set goals, make sure you are also preparing for the unexpected. That means having an emergency fund saved up or having a plan for divesting particular assets as a way to pay for unexpected expenses (i.e. medical bills, emergency home repairs, etc.). Having an emergency fund or emergency plan can go a long way towards protecting your nest egg and keeping you on track to meet your goals. Many people don’t think to build up an emergency fund and thus put all their hard work and savings at risk and don’t truly realize it. If you don’t have one, don’t worry, it’s never to late to start saving for an emergency. If you need help getting started, you should speak with a certified financial planner or wealth manager. So, are you prepared for an emergency?
Saving for or financially planning for the future can be a daunting task. Whether you’re in your twenties and saving for a house or in your forties and kicking your retirement savings into high gear, saving enough to meet your goals can seem impossible and overwhelming. Furthermore, if you have debt to manage and expenses to pay in order to get your finances into proper shape. Many people struggle with this and it’s the reason why I–and the industry I work in–exist. There’s no shame in asking for help when it comes to money. Finances can be tough to manage and they can easily get out of control of you don’t have a plan or understand what your priorities need to be. In such instances, a good financial planner can set you on a path to success by providing you with the knowledge and tools you need to get things in order. Many Americans think they can go it alone when managing their finances or are too embarrassed if they have debt or little savings. For some it works, for others…not so much! If you are one of those embarrassed about your money situation, don’t be. There’s probably more people out there struggling with money than you realize. Even if you have a good grasp of your finances and feel you’re doing well managing your debt and saving for your future, there’s still no reason not to talk with a financial expert. They may be able to suggest investments and ideas for further expanding your wealth or ways to save you more money. So, when was the last time you got help with your finances?
Just because you have lots of money doesn’t mean you’re necessarily a financial wizard. Society is littered with famous celebrities who have squandered massive amounts of money through various means, such as bad investments or poor spending habits. I’m not saying we need to be sympathetic to celebrities who make millions, but their stories, when looked at together, can provide an important lesson for all of us. That is, that having money and being able to properly manage it and care for it are two different things. In other words, just because you have money doesn’t mean you will know what to do with it. This can also be case for average, middle class workers that make up the backbone of American society. There’s also plenty of stories out there of retirees decimating their nest eggs once they reach retirement by spending more than they saved or making poor investment decisions. Here is where knowing what you don’t know is important. If you know you aren’t good with money, make sure you hire a wealth manager or certified financial planner who can help. They can help you set a plan and understand your appetite for risk and avoid investments that may not provide the right return for you as well as help you decide to dump certain investments that take a turn for the worst. A good wealth manager or certified financial planner can also help you to grow your nest egg by also suggesting investments that fit into your plans and meet your risk tolerance. It’s important that you find someone you are comfortable with and who you trust with your money. Now, I’m not saying here that all retirees don’t know what to do with large retirement savings accounts. Of course, there are also many stories of people out there taking a small sum of money and turning it into millions through smart financial decisions. Or of retirees being practical in retirement and making their savings last. However, it can be easy to get caught up in thinking that just because you have money means you know what to do with it.